The charitable sector is at the heart of UK society, involving millions of people and £9.3 billion received in donations in 2011/2012. Around 25 new applications for charitable status are received by the Charity Commission every working day. But the PASC has reported on the state of the legislation that regulates charities and their charitable status and says that:

one of the keys tests set by the Charities Act 2006 for determining charitable status—the public benefit test—is "critically flawed";

the Government should revise the statutory objectives for the Charity Commission, to allow the Commission to focus its limited resources on regulating the sector;

the proposal to increase the financial threshold for compulsory registration of a charity with the Charity Commission should be rejected;

charities should publish their spending on campaigning and political activity.

These are the conclusions of PASC’s inquiry into the implementation of the Charities Act 2006. The Act was broadly welcomed by the charitable sector, but PASC finds it critically flawed on the issue of public benefit.

Charity Commission

The Act says that the purpose of a given function or activity cannot be assumed to be "for the public benefit" and therefore to be charitable, but the Act does not define "public benefit". The Act puts an obligation on the Charity Commission to produce public benefit guidance—a “hospital pass” according to Lord Hodgson of Astley Abbots, who was appointed by the Government to review the Act. It left the Charity Commission in an impossible position.

PASC concludes that the Commission’s costly legal battles with the Independent Schools Council and the Plymouth Brethren Christian Church (or Exclusive Brethren) are evidence of this.

PASC criticises the way the Charity Commission has interpreted public benefit under the Act, it is for Parliament to determine the criteria for charitable status rather than delegating such decisions to the Charity Commission and the courts.

Plymouth Brethren Christian Church

PASC has declined to give its opinion on whether the Preston Down Trust meeting hall of the Plymouth Brethren Christian Church (also known as the Exclusive Brethren) should be afforded charitable status. Advice was received that Parliament should continue to treat the matter as sub judice, pending a possible judicial resolution of the dispute.

Face-to-face fundraising

PASC also considered the impact of face-to-face fundraising, or "chugging"—on the street or on the doorstep—and warns that self-regulation has failed so far to generate the level of public confidence which is essential to maintain the reputation of the charitable sector. The evidence was clear that the regulation of fundraising remains a concern for many members of the public. Two in three people have reported feeling uncomfortable as a result of the fundraising methods used by some charities—an increase on the equivalent figure in 2010.

Businesses also warned about the impact on trade, and Lord Hodgson told the Committee that “chugging affects local shops ... it is a problem in the high street...every part of the sector is damaged by the public’s feeling” on chugging.

PASC Chair

Bernard Jenkin MP, Chair of PASC, said:

"The charitable sector is at the heart of UK society—Britain is among the top nations in the world for charitable donations and they play a vital role in our society. It is essential that public trust and confidence in the charities operating in Britain remains high. The recommendations in this Report are aimed at restoring and maintaining that trust.

We are not happy about the way that the Charity Commission has interpreted the law they were asked to interpret, but they are not entirely to blame for becoming embroiled in costly litigation, because the 2006 Act created ambiguity, which ministers at the time were clear that they did not intend. Litigation is clearly not a good use of energy or resources and undermines public confidence in the Commission and the sector. The situation must be rectified with a new Act to allow the Commission to focus on its proper job. If ministers want the Commission to regulate the sector more than at present, they will have to increase its budget. There are over 163,000 registered charities and thousands more are registered every week. It is already being expected to do too much with too little.

We are today launching this report on the floor of the House and we will call for Parliament to repeal the public benefit provisions in the Charities Act 2006. It must be for Parliament, not the Charity Commission, to determine the criteria for charitable status. It is then for a properly funded Charity Commission to apply those criteria and decide who will be afforded charitable status.

The Government has said that they are awaiting the recommendations of this inquiry before responding to Lord Hodgson's review. We believe that the implementation of our recommendations is essential to restore and maintain public trust in charities and in the Charity Commission, which in turn is essential to promote the good work of charitable organisations in communities across the country."